Dwolla believes that rather than rely on existing credit card networks – which are known to take a 2-5% a transaction – consumers should instead use internet as a means to transfer money quickly, cheaply and more securely than cash…. Dwolla’s main value added is a way to transfer money for much cheaper than credit cards or payment services built on top of credit cards. For merchants, this is a clear advantage. Customers, on the other hand, do not always realize the impact of interchange fees. However, Dwolla has been adding a slew of “add-ons” to their service to appeal to a broader audience:

MassPay – allows payment of up to 2000 people at once; geared towards small to large businesses as a more efficient means of payroll.

Spots – an add-on application that allows users to see which merchants nearby accept Dwolla.

Proxi – An add-on that allows users to see other nearby Dwolla users in real-time.

For years, policy makers have advocated for strategies that increase financial inclusion. According to the Consultative Group to Assist the Poor (CGAP), providing financial services to underserved populations has the potential to improve household welfare, stimulate economic growth and reduce income inequality. [...]

How do companies actually pay bribes in today’s world? The short answer is, by “cooking” their accounts to hide the funds. Companies try to do this in a number of ways, but U.S. enforcement authorities are tuned in, especially when it comes to bribery of foreign officials in connection with international business transactions, which is prohibited by the U.S. Foreign Corrupt Practices Act (FCPA).[1] The U.S. Department of Justice and U.S. Securities & Exchange Commission both have amped up their resources in recent years to make sure they can uncover even the slyest schemes to pay bribes abroad.

Square is a San Francisco based startup founded in 2010 by Jack Dorsey, founder of Twitter. Square enables merchants – typically small businesses and individual contractors – to collect payments by credit card without having to invest in expensive and immobile point of sale terminals. They accomplish this by distributing [...]

LevelUp offers an attractive product for both merchants and consumers. Consumers can download the app entirely free and will receive discounts and meal credits automatically. Merchants benefit by being able to receive payments without paying any interchange fees. Merchants don’t pay any monthly fees and are only charged if LevelUp helps a business acquire or retain a customer. LevelUp also takes a much smaller cut of the initial purchase relative to Groupon. Additionally, the fact that LevelUp is concerned about customer loyalty is seen as a huge boon for merchants – allegedly, 65% of customers using a LevelUp discount return for at least a second visit, compared to fewer than 5% for Groupon.

How do payment companies innovate? Should incumbents and oligopolists be concerned about upstarts? Do online payment companies work with or against existing banks and network operators? Should bank industry alliances scare web companies, telecoms and payment networks?

The answers to these questions depend on a clear understanding of how payment companies can innovate. I argue [...]